Problem
Rain?, Inc., is a large? food-processing company. It processes 157,000 pounds of peanuts in the peanuts department at a cost of $303,100 to yield 25,000 pounds of product? A, 99,000 pounds of product? B, and 14,000 pounds of product C. Product A is processed further in the salting department to yield 25,000 pounds of salted peanuts at a cost of $36,000 and sold for $12 per pound.
Product B? (raw peanuts) is sold without further processing at $4 per pound.
Product C is considered a byproduct and is processed further in the paste department to yield 14,000 pounds of peanut butter at a cost of $13,000 and sold for $7 per pound.
The company wants to make a gross margin of? 10% of revenues on product C and needs to allow? 20% of revenues for marketing costs on product C. An overview of operations? follows:
Joint Costs $303,100
Peanuts Department processing of 157,000 lb
Separable costs
25,000 pounds Salting Department processing $36,000
14,000 pounds Paste Department processing $13000
Salted Peanuts 25,000 pounds $12/lb
Raw peanuts 99,000 pounds $4/lb
Peanut butter 14,000 pounds $7/lb
1. Compute unit costs per pound for products? A, B, and? C, treating C as a byproduct. Use the NRV method for allocating joint costs. Deduct the NRV of the byproduct produced from the joint cost of products A and B.
2. Compute unit costs per pound for products? A, B, and? C, treating all three as joint products and allocating joint costs by the NRV method.